fpdteam, Author at Bennetts Accountancy

Resolving commercial rent debts

31st March 2022 by fpdteam

A new law that seeks to resolve certain remaining commercial rent debts accrued during the pandemic received Royal Assent on 24 March 2022. The new law introduces a legally binding arbitration process to resolve certain outstanding commercial rent debts related to the pandemic. It is hoped that this new law will help resolve disputes about certain pandemic-related rent debt and help the market return to normal as quickly as possible.

The law applies to commercial rent debts of businesses in England and Wales including pubs, gyms and restaurants which were mandated to close, in full or in part, from March 2020 until the date restrictions ended for their sector. Debts accrued at other times will not be in scope.

Before using the arbitration process, commercial landlords and tenants are strongly encouraged to negotiate agreements using the Commercial rents Code of Practice that was published in November 2021. The Code of Practice applies across the UK.

The general moratorium on commercial evictions and restrictions on Commercial Rent Arrears Recovery (CRAR) in England and Wales also ended on 24 March 2022, but eligible firms remain protected for the next 6 months during which arbitration can be applied for or until the conclusion of an arbitration.

The moratorium provided firms with breathing space to negotiate how to address the cost of commercial rent debts caused by the pandemic before the new law came into place.

Source:Department for Business, Energy & Industrial Strategy| 28-03-2022

On your bike – cycle to work exemption

31st March 2022 by fpdteam

The Cycle to Work scheme was introduced over 20 years ago to help promote the use of healthy ways to commute to work using an environmentally friendly mode of transport.

The scheme allows employers to provide bicycles and cyclists’ safety equipment to employees as a tax-free benefit. The scheme must be offered to all employees and the bike must be used mainly for qualifying journeys i.e., between home and work. However, pleasure use of the bike is also allowed. Where the scheme conditions are satisfied employees can benefit from a significant tax and National Insurance Contributions (NICs) reduction. In addition, there is no employer liability to NICs.

The cycle to work benefits only relate to the loan period, however, it is commonplace for an employer or a third-party bicycle provider to offer the employee the bicycle / equipment they have been using for sale after the loan period has ended. The bike may be offered to the employee for sale at a fair market value, but this must be done as a separate agreement.

Employers of all sizes including those in the public, private and voluntary sectors are eligible to take part in the scheme to provide (technically loan) bicycles and cyclists’ safety equipment to employees as a tax-free benefit. The scheme can also be used for electronic bikes known as e-bikes.

Source:HM Revenue & Customs| 28-03-2022

Scammers target Self-Assessment taxpayers

31st March 2022 by fpdteam

Fraudsters are continuing to target taxpayers with scam emails, texts and calls following the deadline for submission of Self-Assessment returns for 2020-21. In fact, over the last year, HMRC received more than 570,000 reports about suspicious HMRC contacts.

A number of these scams purport to tell taxpayers they are due a fake tax rebate or tax refund from HMRC and ask for bank or credit card details in order to send the fake tax refund. The fraudsters use various means to try and scam people including making contact by phone calls, texts or emails. In fact, fraudsters have been known to threaten victims with arrest or imprisonment if a bogus tax bill is not paid immediately.

HMRC’s has a dedicated Customer Protection team to identify and close down scams. The team seeks to identify suspect emails before they reach the taxpayer. Since 2017, these technical controls have prevented 500 million emails from reaching taxpayers, but the problems continue as the fraudsters adapt and try new methods to evade capture.

Taxpayers should also try and recognise the signs of fraud to avoid becoming victims themselves. For example, genuine organisations like HMRC and banks will never contact customers asking for their PIN, password or bank details.

If you think you have received a suspicious email claiming to be from HMRC you are asked to forward the details to phishing@hmrc.gov.uk. Suspect texts should be sent to 60599 and there is a form on GOV.UK that can be used to report suspicious phone calls. If you have suffered financial loss, you should contact Action Fraud on 0300 123 2040 or use their online fraud reporting tool.

Source:HM Revenue & Customs| 28-03-2022

Overview of Digital Services Tax (DST)

24th March 2022 by fpdteam

The UK’s Digital Services Tax (DST) came into operation on 1 April 2020. This tax is designed to ensure that the major social media, search engine and online retailers are subject to a 2% tax on revenues generated from the participation of UK users of their services.

Businesses are liable to the DST when the group’s businesses worldwide revenues from the specified digital activities are more than £500 million and more than £25 million of these revenues are derived from UK users. There is an allowance of £25 million, which means a group’s first £25 million of revenues derived from UK users will not be subject to Digital Services Tax.

The following three services are considered digital services activities for the purposes of DST:

a social media service,
an internet search engine; or
an online marketplace.

A group can make a voluntary election to calculate the liability to DST using an alternative basis of charge provision. The alternative basis of charge will benefit groups making a loss or operating at a low margin on their UK digital services activity.

There will be a review of DST by HM Treasury before the end of 2025 which will be laid before Parliament.

Source:HM Revenue & Customs| 21-03-2022

Bare or simple trusts

24th March 2022 by fpdteam

A trust is an obligation that binds a trustee, an individual or a company to deal with the assets such as land, money and shares which form part of the trust. The person who puts assets into a trust is known as a settlor and the trust is for the benefit of one or more ‘beneficiaries’. The trustees make decisions regarding how the assets in a trust are to be managed, transferred or held back for the future use of the beneficiaries.

IHT planning can involve the careful use of trusts. There are a number of trusts which are subject to different tax rules. The main types are bare trusts, discretionary trusts, interest in possession trusts and mixed trusts.

One of the most widely used, and as the name suggests, most basic kind of trust is a bare trust. These trusts are also known as simple trusts or naked trusts. Under a bare trust, each beneficiary has an immediate and absolute title to both capital and income. The beneficiary of a bare trust is taxable on the trust income and gains.

HMRC’s guidance states that beneficiaries must include trust income and gains in any tax return they are required to complete or in any forms R40. The trustees of a bare trust may pay the tax due to HMRC on behalf of a beneficiary, but it is the beneficiary who is strictly chargeable to tax.

There are key differences between a bare trust and other types of trusts that are beyond the scope of this article.

Source:HM Revenue & Customs| 21-03-2022

Extended loss relief carry-back

24th March 2022 by fpdteam

A reminder that the temporary extension to the eligible carry back period for trading losses applies for company accounting periods ending between 1 April 2020 and 31 March 2022 and for tax years 2020-21 and 2021-22 for unincorporated businesses. This extended loss relief allows trading losses to be carried back for three years (rather than one).

The extended relief was introduced to help businesses who suffered increased losses as a result of the coronavirus pandemic. Carrying back a trading loss may allow businesses to generate tax repayments from an earlier profit-making period.

The extension to the relief applies to both incorporated and unincorporated businesses and is subject to a £2,000,000 cap. The £2,000,000 maximum applies separately to unused trading losses made by incorporated companies, after carry-back to the preceding year, in relevant accounting periods ending between 1 April 2020 and 31 March 2021 and a separate maximum of £2,000,000 for periods ending between 1 April 2021 and 31 March 2022.

The £2,000,000 for companies is subject to a group cap for each relevant period. Extended loss carry-back claims must usually be made as part of a company tax return. However, smaller claims below a de minimis limit of £200,000 may be made without having to wait to submit a company tax return.

Source:HM Revenue & Customs| 21-03-2022

Employer company car considerations

24th March 2022 by fpdteam

If you are thinking about purchasing a company car through a limited company, there are many issues that need to be considered. In this short article we will point out some of the main issues to be aware of, but it is important to properly research this area and weigh up all the available options.

The tax treatment of the purchase will depend on how the purchase of the company car is financed.

The purchase of a company car will be classed as a fixed asset and tax relief will be obtained by way of capital allowances. The amount of capital allowances that can be claimed will fall within one of the following 3 categories:

100% First Year Allowance. New and unused electric or zero emission cars emission cars benefit from 100% capital allowances. This means that 100% of the cost of the car can be deducted in the first year.
18% of the car’s value (main rate allowances). This effectively means that 18% of the purchase price can be deducted from your profits each year before you pay tax.
6% of the car’s value (special rate allowances). This effectively means that 6% of the purchase price can be deducted from your profits each year before you pay tax.

It is clearly demonstrated from the percentages above that the government is encouraging employers to choose more fuel-efficient vehicles by offering a tax incentive.

The company will also be liable to pay Class 1A NICs in respect of the provision of a company car based on the car benefit charges. Employers currently pay Class 1A NICs at the rate of 13.8%. This is increasing to 15.05% from 2022-23. There will be additional Class 1A NICs due where the company pays for private use of fuel.

The employee benefitting from the use of a company car will also face additional tax costs from the use of their company car. This depends on the rate of tax they pay, the value of the car and its C02 emissions.

Source:HM Revenue & Customs| 21-03-2022

Inheritance Tax-free gifts reminder

24th March 2022 by fpdteam

We wanted to remind our readers of the Inheritance Tax (IHT) implications of making cash gifts during the current 2021-22 tax year that will end on 5 April 2022.

You can give away up to £3,000 worth of gifts each tax year. This is known as your annual exemption. Any unused part of the annual exemption can be carried forward, but only for one year. So, if you didn’t make any cash gifts in 2020-21, you could gift up to £6,000 before the end of this tax year.

There are also generous exemptions for normal gifts made out of your income, but you must be able to maintain your standard of living after making the gift. There are also reliefs available for wedding or civil ceremony gifts. You can gift up to £1,000 per person with higher limits of £2,500 for a grandchild or great-grandchild, £5,000 for a child.

You can also give as many small gifts of up to £250 per person as you want during the tax year but only if you haven’t used another exemption on the same person. There is no IHT to pay on lifetime gifts between you and your spouse or civil partner as long as you both live permanently in the UK.

Other gifts, outside these limits, count towards the value of your estate and should be carefully considered.

Source:HM Revenue & Customs| 21-03-2022

Spring Statement 2022

23rd March 2022 by fpdteam

The Chancellor, Rishi Sunak, has delivered his Spring Statement to the House of Commons against a backdrop of a growing cost of living crisis. The Chancellor also stressed that, apart from the untold human suffering, the Russian invasion of Ukraine is creating further uncertainty in the domestic and global economy, particularly in relation to energy markets and the food supply-chain.

On the morning of the Spring Statement, the Office for National Statistics (ONS) announced that the rate of Consumer Price Index inflation increased to 6.2% in February putting further pressure on the Chancellor to act. The Office for Budget Responsibility (OBR) also expects average inflation to rise to 7.4% this year.

We have highlighted below the main tax measures that were announced:

National Insurance contributions (NICs)

The Chancellor did not remove the 1.25% increase in NICs due to come into effect from this April to help fund the NHS and Social Care. However, he did try to soften the blow by announcing a significant increase in the National Insurance Threshold from £9,880 to £12,570. This increase will see the alignment of the Primary Threshold (PT) for Class 1 NICs and Lower Profits Limit (LPL) for Class 4 NICs with the personal allowance of £12,570 from 6 July 2022. It has also been confirmed that the thresholds will remain aligned going forward. According to government figures this means that around 70% of employees will pay less NICs, even accounting for the introduction of the Health and Social Care Levy.

The PT and LPL will be £9,880 (as previously announced) from 6 April 2022 – 5 July 2022. It is unusual for tax rates to change during a tax year, but the Chancellor was facing pressure to make changes and the short period before the new tax year starts left him with no choice but to delay the increase for 3 months. July is the earliest date that will allow all payroll software developers and employers to update their systems and implement the necessary changes. This means the LPL will be £11,908 for the 2022-23 tax year which is equivalent to 13 weeks of the threshold at £9,880 and 39 weeks at £12,570.

Reducing Class 2 NICs payments for low earners

From April 2022, the self-employed will see Class 2 NICs liabilities reduced to nil on profits between the Small Profits Threshold (SPT) and LPL. This will ensure that no one earning between the SPT and LPL will pay any Class 2 NICs, while allowing individuals to be able to continue to build up National Insurance credits. This change represents a tax cut for around 500,000 self-employed people worth up to £165 per year.

Employment Allowance

In his speech, the Chancellor confirmed that the government would increase the Employment Allowance by £1,000 to £5,000 from April 2022. This represents a tax boost for around 495,000 small businesses who can claim an increased reduction in their NIC liabilities or even reduce their bills to zero.

In total, this means that from April 2022, 670,000 businesses will not pay NICs and the Health and Social Care Levy due to the Employment Allowance. The Employment Allowance is only available to employers with employer NIC liabilities of under £100,000 in the previous tax year. Connected employers or those with multiple PAYE schemes will have their contributions aggregated to assess eligibility for the allowance.

Fuel duty cut

The Chancellor announced a temporary UK-wide 5p per litre cut in fuel duty on petrol and diesel from 6pm on 23 March 2022 for 12 months. This is a saving worth around £100 for the average car driver, £200 for the average van driver, and £1500 for the average haulier in the coming year. This represents total savings for households and businesses worth around £2.4 billion in 2022-23 and is only the second cut in fuel duty over the last 20 years.

VAT

The government will expand the scope of VAT relief available for energy saving materials (ESMs) by reducing VAT from 5% to 0% from 1 April 2022 until 31 March 2027. This will ensure that households having energy saving materials installed like solar panels, heat pumps, or insulation will pay no VAT.

The government will also include additional technologies and remove the complex eligibility conditions, reversing a Court of Justice of the European Union ruling that unnecessarily restricted the application of the relief. A typical family having roof top solar panels installed will save more than £1,000 in total on installation, and then £300 annually on their energy bills.

The VAT rate cannot immediately be reduced to 0% in Northern Ireland due to the Northern Ireland Protocol. However, the Northern Ireland Executive will receive a Barnett share of the value of the relief until it can be introduced UK-wide.

Household Support Fund

The government launched a £500 million package of support for vulnerable households in October 2021. The Household Support Fund is used to help support millions of vulnerable households in England and monies is distributed by councils. This means that local councils can use the funding to provide discretionary support to vulnerable households. This could include using small grants to meet daily needs such as food, clothing, and utilities.

The Chancellor announced as part of his Spring Statement measures that the government will provide an additional £500 million for the Household Support Fund from April 2022. The Barnett formula will apply in the usual way to additional funding for the devolved administrations.

R&D tax relief reform

It has been confirmed that from April 2023, all cloud computing costs associated with R&D, including storage, will qualify for relief. This change will boost sectors where the UK is a world-leader, including AI, robotics, manufacturing, and design. Further changes to the relief may also be announced as part of the Budget later this year.

Income Tax basic rate

Whilst no immediate changes were announced, the Chancellor confirmed that the government will reduce the basic rate of Income Tax to 19% from April 2024.

This will apply to the basic rate of non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland and to the savings basic rate which applies to savings income for taxpayers across the UK.

The reduction in the basic rate for non-savings-non-dividend income will not apply for Scottish taxpayers because the power to set these rates is devolved to the Scottish Government. However, the Scottish government will receive additional funding which they can use as they see fit, including on reducing Income Tax or other taxes, or increased spending.

Source:HM Government| 22-03-2022

Transferring property to unmarried couples and other joint owners

17th March 2022 by fpdteam

Stamp Duty Land Tax (SDLT) is a tax that is generally payable on the purchase or transfer of land and property in England and Northern Ireland. It is also payable in respect of certain lease premiums. You may also need to pay SDLT when all or part of an interest in land or property is transferred to you and you give anything of monetary value in exchange.

There are important issues to consider if you transfer land or property between unmarried couples and other joint owners. HMRC’s guidance on the subject states as follows:

You do not pay SDLT if 2 or more people jointly own property (as joint tenants or tenants in common) and you divide it physically and equally and own each part separately. But, if one person takes a bigger share, or all of the other’s share, and pays cash or some other consideration in exchange, you must tell HMRC. If the amount you pay is more than the current threshold, you will pay SDLT.

Joint owners (this may include unmarried couples who are splitting up) may agree that one of them will take over ownership of a property they bought together, including any outstanding mortgage.

In this case the person taking ownership will pay SDLT on the total chargeable consideration of the following (either or both), if it exceeds the SDLT threshold:

any cash payment that one of the couple makes to the other for their share
the proportion of the outstanding mortgage that belongs to the share of the property being transferred

Source:HM Revenue & Customs| 14-03-2022